Good afternoon and welcome to the CytoSorbents' Third Quarter 2019 Financial and Operating Results Conference Call. At this time, all participants are in a listen-only mode. Following the formal remarks we will open the call for your questions. Please be advised that the call will be recorded at the company's request.

At this time, I'd like to turn the call over to your moderator, Jeremy Feffer. Please go ahead..

Thank you, Saachi and good afternoon. Welcome to CytoSorbents' third quarter 2019 financial and operating results conference call. Joining me today from the company are Dr. Phillip Chan, Chief Executive Officer and President; Vincent Capponi, Chief Operating Officer; Kathleen Bloch, Chief Financial Officer; Dr. Eric Mortensen, Chief Medical Officer; Dr.

Christian Steiner, Senior Vice President of Sales and Marketing from Germany; and Chris Cramer, Vice President of Business Development. Before I turn the call over to Dr. Chan, I'd like to remind listeners that during the call, management's prepared remarks may contain forward-looking statements, which are subject to risks and uncertainties.

Management may make additional forward-looking statements in response to your questions today. Therefore, the company claims protection under Safe Harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Actual results may differ from results discussed today, and therefore, we refer you to a more detailed discussion of these risks and uncertainties in the company's filings with the SEC.

Any projections as to the company's future performance represented by management include estimates today as of November 5th, 2019 and we assume no obligation to update these projections in the future as market conditions change.

During today's call, we will have an overview presentation covering the operating and financial highlights for the third quarter by Dr. Chan and Ms. Bloch. Following their presentation, we will open the line to your questions during the live Q&A session with the rest of the management team. At this time, it's my pleasure to turn the call over to Dr.

Chan.

Phil?.

Thank you very much Jeremy and good afternoon everyone. I'm pleased to say that the third quarter results came in generally in line with our expectations particularly given seasonal aspects of the summer quarter as well as foreign exchange effects. During the quarter, we achieved 73,000 Cytosorbents treatments delivered up from 51,000 a year ago.

Trailing 12 months total revenue was $23.6 million, including product sales and grant income versus $21.1 million a year ago. Blended product gross margins expanded to 77% in the third quarter. And orders from two of three distributor partners that were discussed in the first quarter earnings call had ordered in the third quarter.

We extended CytoSorb distribution to the total of 58 countries with Latin America expansion to Brazil, Colombia, and Costa Rica and we received renewal of our CytoSorb CE Mark through May 2024 and an annual -- our annual ISO 13485 certification of our manufacturing facility through September 2023.

During the quarter, we also made significant clinical progress including the near completion of the REMOVE trial, REFRESH 2-AKI trial progress.

Also the first study start of a clinical trial designed to evaluate CytoSorb for the treatment of cytokine release syndrome and encephalopathy caused by cytokine release syndrome and CAR T-Cell immunotherapy patients.

And also the start of our new United Kingdom TISORB trial for the removal of ticagrelor, a blood thinner that is often a problem in emergency surgery patients that causes unwanted bleeding.

With that, let me turn it over to Kathy to talk about the financial highlights of the quarter and I'll be back again afterwards to talk about how we plan to drive significant growth in 2020.

Kathy?.

Well, thank you, Phil and good afternoon, everyone. So, for today's call, I'll provide an update regarding our third quarter 2019 financial results, which includes product sales progress and in addition, I'll provide an update around our working capital and cash runway.

So, CytoSorb product sales for the third quarter of 2019 were $5.7 million, which is a 12.3% increase over product sales of approximately $5.1 million for Q3 of 2018.

This increase was driven by an increase in direct sales of approximately $891,000 resulting from sales to those new customers and repeat orders from existing customers, offset set by a decrease in distributor sales of approximately $266,000.

The Euro to dollar exchange rate declined from an average rate of $1.16 in the third quarter of 2018 to an average rate of $1.11 in the third quarter of 2019.

And in fact, if the Euro to dollar exchange rate had remained unchanged from the third quarter of 2018, Q3 2019 product sales would have been approximately $239,000 higher than actually reported or approximately $6 million, which represents an increase of 17% over Q3 2018 product sales.

Our total revenues which include our product sales as well as grant revenue were approximately $6.1 million for the third quarter of 2019 as compared to approximately $5.7 million for Q3 of 2018, an increase of approximately 6%.

Third quarter 2019 gross profit grew to approximately $4.4 million, an increase of more than 19% or $709,000 of gross profit of approximately $3.7 million for the third quarter of 2018.

And we're also pleased to report that our gross profit margins on product sales were approximately 77% for Q3 of 2019 as compared to 72% for the third quarter of 2018. And this is primarily as a result of the achievement of manufacturing efficiencies. So, now we'll turn to our nine months financial results.

Product sales, for the first nine months of 2019 were approximately $16.2 million, which is an increase of 9% over product sales of $14.8 million for the same period of 2018.

And once again, the euro to dollar exchange rate results -- euro to dollar exchange rate declined from an average rate of $1 19 in the first nine months of 2018 to an average rate of $1.12 in the first nine months of 2019.

And once again, if the euro to dollar exchange rate had remained unchanged from 2018 or nine months 2019 product sales would have been approximately $977,000 higher than actually reported or approximately $17.1 million, which would be an increase of 16% over the prior year product sales.

Grant revenue was approximately $1.4 million for the first nine months of 2019 compared to approximately $1.6 million for the same period of 2018, just due to the timing of grant revenues.

And our total revenues were approximately $17.5 million for the first nine months of 2019 as compared to $16.4 million for the same period of 2018, an increase of approximately 7%. Next, we’ll look at our quarter-over-quarter product sales. Our third quarter 2019 product sales were approximately $5.7 million.

This is a slight decline from our record $5.8 million in product sales reported in Q2 2019. This slight decline in quarter-over-quarter sales is similar to what occurred in the prior year in Q3 2018 and as we believe, a result of the slowdown in operating procedures in the summer months in Europe in particular in Germany.

So, next we'll look at our trailing 12 months product sales, and as you can see from this chart, overall our annual product sales growth continues to exhibit a very solid growth trajectory.

And despite quarter to quarter variability, we expect continuation of this overall positive trend in the future with a return to higher rates of growth in sales, particularly in 2020 as a result of our sales growth strategy. And Phil will be discussing this in more detail in a few minutes.

We've also plotted on this chart and the red line, our blended gross margins for the third quarter of each year 2014 through 2019. These gross margins blends are higher margin direct sales with our lower margin distributor sales. And one can observe the continuous year-over-year improvement we've been making in growing our product gross margins.

For the third quarter of 2019, our gross margins rose to 77% and looking forward, we continue to target achieving 80% blended gross margins in the fourth quarter of 2019. So, finally a few words on working capital.

As of September 30, 2019, we had approximately $16 million in cash, which we believe provides a solid operating foundation for the company. We believe the existing cash runway will allow us to meet our operating needs well into 2020. And as we discussed previously, we have the at-the-market facility with co-agents Jefferies and B.

Riley FBR in place, which allows us to raise up to $25 million in equity. We haven't used it yet. But this ATM provides an efficient cost effective way for us to raise funds for the company if that is needed. And as you are aware, in the past, we have been very careful with regards to our use of the ATM.

We’re always trying to strike a balance between having a strong balance sheet which provides adequate capital to meet our operating and clinical trial objectives, but also avoiding shareholder dilution. And turning to our capital structure, as of September 30, we have approximately 37.5 million common shares outstanding on a fully diluted basis.

And with that, I'd like to turn the call back over to Phil.

Phil?.

Thank you very much, Kathy. We expect a strong finish to 2019, a year of modest growth. But the real story we believe is Cytosorbents 2020, where we're predicting faster growth ahead. There's many reasons why we believe this is possible.

So first of all, direct sales are approximately 75% of our product sales with higher product gross margins and because of that, we made an effort to double the number of direct sales countries from five to 10 in 2019, adding Poland, Sweden, the Netherlands, Norway and Denmark to our existing territories of Germany, Austria, Switzerland, Belgium and Luxembourg, where we have been going direct for a number of years, all with the combined population of approximately 190 million people.

We also expanded our countries overall to 58, with registration pending at major countries, including Brazil, Mexico, South Korea, and Colombia that add more than 440 million people to the population that CytoSorb could potentially serve.

Since 2018, we added 50 people or an approximate 50% increase in headcount, to now 155 employees across the company, with many key hires in the past three to six months. This was not an easy task.

In fact, the challenge to find the right people in a very tight labor market in Germany, and in Europe in general, as well as challenging labor laws, delayed our ability to bring these people on in time to impact 2019 sales in a significant way.

However, we have the bulk of our team on board and we believe that having them on board is right in time for impacting 2020 sales. We significantly strengthen the commercial organization by doubling the customer facing sales reps and specialist, particularly in Germany.

We sub-divided management of direct sales to be able to take into account all of the business opportunities that we have across those 10 countries. We also brought a new leadership and expanded our leadership of distributor and partner sales. We also brought in a new head of marketing who will report to Dr.

Christian Steiner, our SVP of Sales and Marketing, and bolstered manufacturing quality, clinical support, as well as reimbursement personnel.

This increasing manpower, we believe, will enable a more focused targeting of key accounts with modest impact this year, but this increase in headcount is expected to be a major catalyst for strong growth in 2020. On top of that, we believe that demand for CytoSorb continues to grow.

CytoSorb sales are driven primarily by reorders with approximately 85% of our invoices from repeat customers. And what we have been seeing is that the average number of CytoSorb cartridges per invoice continues to grow at many accounts, demonstrating increased usage and adoption.

The usage is increasing, we believe, because CytoSorb is helping physicians regain control of their very sick patients, particularly in controlling complications of inflammation.

Clinical data generation continues to be robust with more than 120 publications in peer-reviewed scientific and medical journals, and clinicians have honed in on key areas where CytoSorb works well, such as sepsis, cardiac surgery, liver failure, and many other applications.

These new applications, the new data are expected to drive more rapid adoption and broader base usage.

One of those studies we discussed recently in a press release and this was a retrospective study, evaluating the use of CytoSorb in patients with septic shock on renal replacement therapy, which implies that their kidneys have failed, which is an independent risk factor for death in patients with septic shock.

In this retrospective study of validating primary endpoints of 28-day mortality, they evaluated two sets of patients. One set of patients were patients just receiving continuous renal replacement therapy alone and that was about 49 patients, whereas patients treated with CytoSorb amounted to 67 patients.

What we saw in this patient population -- in these two groups was that, before treatment ever started the CytoSorb patients were sicker, as measured by the SOFA score, which is a Sequential Organ Failure Assessment score of 13.8 in the treatment arm, versus 12.8 in the control arm, and that predicts the mortality of 75% in the CytoSorb arm versus 68% in the control.

Authors used something called the stabilized Inverse Probability of Treatment Weights, or IPTW. That is commonly used in observational studies to adjust for differences in the baseline characteristics.

In fact, if you look at articles being reported in the New England Journal of Medicine, JAMA and others, this is a commonly used statistical and analytical technique.

In doing so, they demonstrated that CytoSorb showed a decreased mortality -- CytoSorb treatment led to decrease mortality at 53% versus 72% in the control arm, and this data suggests that 19 patients in every 100 patients with septic shock on continuous renal replacement therapy might be saved with CytoSorb.

This is one of the largest studies looking at the impact of CytoSorb on mortality. And when you control for baseline characteristics of these patients, the data are very encouraging.

Now another study that was done that we've been talking about recently has been the use of CytoSorb -- the investigational use of CytoSorb to remove antithrombotic drugs like rivaroxaban and ticagrelor. These are often called blood thinners.

And this class of antithrombotic drugs of which Eliquis, Xarelto, Pradaxa, Brilinta and Plavix are amongst some of the common names. These drugs have collective sales worldwide have more than $20 billion, where millions of people around the world are on these drugs.

So in the United States alone, where the 6 million people are actually on these blood thinners as of a 2015 estimate, because they're used to try to reduce stroke risk and risk of heart attacks in patients who have undergone either stent placement for coronary artery disease, or who had a heart attack in the recent past.

There are other drugs in this class also that are used in patients with other types of risk factors for developing stroke or heart attacks, such as people with atrial fibrillation, people with peripheral artery disease, people with underlying pulmonary embolism or deep vein thrombosis and these are some of the most commonly prescribed drugs in the world.

The problem with this is that approximately 4% of patients will have an acute cardiac event due to their underlying cardiac disease or underlying comorbid disease that will require either urgent or emergent cardiac surgery.

Examples of this are, for example, a clot inside a newly placed stent in a coronary artery or damage to the coronary artery like in a coronary artery dissection that requires CABG operation, a Coronary Artery Bypass Graft open heart operation, or someone who comes in with complaints of chest pain only to find out that they have a dissecting aortic aneurysm that will potentially rupture and kill them if something is not done immediately.

However, when these patients come in with these blood thinners on board, it greatly reduces their ability to clot. And approximately 30% of patients that undergo emergency cardiac surgery will suffer severe massive bleeding perioperatively Was a very interesting study came out recently from St.

Georg Hospital in Hamburg, Germany, one of the oldest hospitals in Europe, and a major Cardiac Surgery Center. They evaluated 55 patients on either ticagrelor, which is also known as Brilinta and rivaroxaban also known as Xarelto that underwent emergency cardiac surgery.

Of these 39 were retreated with CytoSorb intra-operatively in this investigational application. And what they found was very interesting. Patients not using CytoSorb had significant bleeding complications, and that those using CytoSorb had significantly reduced need for red blood cell transfusions and platelets.

They had statistically significant reduction in surgical drainage, having it in many cases.

They had a reduced need for rethoracotomy where 37.5% of patients in the control arm required a re-opening of their chest cavity and re-exploration of what could potentially be bleeding, whereas none of the patients in the CytoSorb treatment arm required rethoracotomy.

They also saw a reduced length of operation and reduced time in the intensive care unit and a reduced hospital stay all of which were statistically significant. And in a separate cost-effectiveness analysis that was done in the United Kingdom, they concluded a savings of approximately $5,000 per case due to these clinical benefits.

So we believe that although this is currently an investigational application of the therapy, that this potentially if we obtained European Union label expansion for CytoSorb for this application, this could be a very significant driver of sales in 2020. Now another catalysts are talking about data is the projected near-term data catalyst.

We have a number of studies that have either started or are ongoing and the major ones are shown here on this slide. First of all the Germany removed endocarditis randomized control trial is now at its target enrollment of 250 patients, well ahead of schedule. They've decided to roll-up to an additional 15 patients to account for potential dropouts.

And that is expected to conclude by year end. Once that -- once the study is done, the investigators believe that they will have analysis of their data and presentation of their data in mid-2020. Second study is the U.S. REFRESH 2-AKI pivotal trial, randomized control trial, where now currently 144 patients are enrolled out of a target of 400 patients.

And an interim analysis at 200 patients is expected at the end of the first quarter into the second quarter of 2020.

The third trial is a new trial and this is a the United Kingdom TISORB study where we will it is a company sponsored study where we will be looking specifically at the ability of CytoSorb to remove ticagrelor, one of these blood thinners that we talked about in the prior slide.

And its effect on platelet function, and a companion study will also look at cost effectiveness analysis, as well as efficacy in terms of reduction in bleeding events in that study. The primary study is expected to complete in the third quarter of 2020. And Eric, Dr.

Eric Mortensen, our Chief Medical Officer will comment on the importance of that study and this program in general a little bit later. And then the fourth study is our HemoDefend IDE is our HemoDefend study. And we fully expect to have the IDE filed by the end of this year. And we're working very hard to do that with potential approval in 2020.

So with that said, in terms of guidance, we’ve now historically given specific financial guidance on quarterly results, until the quarter has been completed. However, we do expect that the fourth quarter 2018, product sales will exceed a year goes fourth quarter product sales.

And we fully expect that, the second half of this year, product sales will exceed those of the first half of this year. As Kathy mentioned, we reiterate our guidance that we expect to achieve blended product gross margins of 80% on a quarterly basis this year. With that, that ends our formal comments.

And operator, please open the call up for the Q&A session..

Hi, good afternoon. Thanks, Phil and Kathy. The update on the outlook for some high level commentary in 2020 – apologize for the background noise here. But I wanted to just get some further color just in terms of where you are with this, this move towards stronger direct sales force but also broadening the reach of your distributors into new territory.

Have it seems as if you still battling a headwind on the distributor revenue side and, and just and also you're still very early in terms of adding direct reps in different territory.

So I guess the direct question is, can you just talk about ex Germany, direct sales and but engineering just in terms of getting the salesforce where you want it to be? And then also on the distributor side, you know, they're ramping up in a new territory.

Can you just give us an update of where you are in terms of distributors taking orders? I believe you said two of the three are taking orders so far.

And then, do you expect distributor revenues to grow in 2020?.

Thanks, Josh. So taking the distributor issue first, you know, as we disclose in the first quarter of this year, that we had three major distributors that stop ordering for the moment, because of primarily inventory issues. One of those was Fresenius Medical Care.

And their particular issue is that as a transition from European sales to seeking registration of sites or in Mexico and South Korea, they were left with quite a bit of European inventory that the current territories that they have in Europe, including France, the Czech Republic and Finland. They continue to make good progress against that inventory.

But until, we get registration in Mexico and until we get registration in South Korea. They're they have been holding off on ordering, because they can't order until they get registration in Mexico and South Korea, and that they can't transfer European inventory to those countries.

So, but the other two distributors are ordering now and they are back to kind of their typical order pattern. We brought in a New Head of International Sales that focused on distributors and partners at the very beginning of 2019. And she has done a fantastic job in building out that organization.

We're, it is now where – we have regional managers that basically are our resident in their region, instead of trying to manage those territories from Germany, for example, that speaks, you know, the local languages and have been very hard at work in helping to develop the distributor territories and various countries.

And so we, although the impact of their efforts are not readily apparent this year, I think that there's been a lot of market development and a lot of infrastructure built and a lot of goodwill generated, where we feel that the distributor – the distributor, cohort, to 48 countries that we have will actually be a strong driver of sales in 2020.

So in terms of direct sales outside of Germany, so clearly Germany, this quarter, I think accounted for about 60% of our sales, and is a very important country as the, as I mentioned before the largest medical device market in the European Union and the third largest in the world.

And, again, we have doubled the customer facing folks in Germany, we've subdivided Germany, so that our sales reps can focus in on our core accounts, and really detailed them the way that they need to detail them in order to drive – in order to take advantage of the strong demand in Germany that we see.

That said, outside of Germany, the sales, for example, Austria and Switzerland continue to robust, I think that Switzerland with hopefully a pending assignment of reimbursement value to the procedure code that we achieved more than a year ago, that should also be a catalyst for sales in Switzerland.

Now, the other countries that we talked about are also have a lot of potential. One of the strongest ones is in Poland. And here we just started selling in Poland with our direct sales force in April of this year.

And what we can report is that there's been a lot of great progress amongst the sales team within Poland and efforts generating keep any leader interest and support, going to conferences and, and really working with Polish physicians and healthcare workers to drive awareness and usage of this product.

So in 2020, For example, we expect to Poland will be a solid contributor to overall sales. But the other countries also, I think, have are benefiting from a renewed focus. And, as I mentioned, we brought in a head of x, up direct sales outside of Germany.

So we have one person focused specifically on Germany, and a new person focus specifically on the nine other countries outside of Germany, where we're going direct. And I think that new focus, we've been very encouraged by the progress that he's made so far. He's just been on board for just a couple of months now.

But I think that he's integrated very well. And I'm very confident that after having met with him many times now, and having heard his strategy for those countries that he will be able to can to really drive continued growth in the ex-Germany, direct countries. So, I don't know if that's helpful to you.

But I think that, there's a lot of people that we brought on recently and again, with the really the key players coming on in the past three to six months. And it takes a little bit of time to get to know the product, get to know the company, get to know the people, get to know build a strategy and implement this strategy.

But again, we feel that we're very well positioned for a strong 2020 start, and we expect -- and then we believe that having this infrastructure on board will definitely benefit Q4 which is why we're confident about ending the year in a strong way..

No. That was super helpful is equity. So thank you. And just like follow-up is we appreciate a clinical signal scientists Torben and cardiac surgery patients are in a regulated and reversing or an equation status. Just wanted a multi part question here.

First, just wanted to make sure I heard you correctly, really do you think that that this could be a driver this indication in 2020, or, I mean when you talk about the see Mark approval pathway, whether you need more data, whether you can submit with the data set that that you downloaded today and then in a previous press release.

And then secondarily, is there a future clinical trial on the road with using revisions are also as well? Is that potentially in the pipeline? I know you have a lot in front of you. That was the initial trial that he announced, but just had that question as well. Thanks for taking questions..

Yeah, absolutely. Thanks, Josh. Well, so what I would say is that we believe that this is a very important category. This is a very important potential application for scientists are where the effect is very pronounced.

And, let me turn it over actually to Eric Mortensen, our Chief Medical Officer, who's been really instrumental in taking some of the -- in taking some of these studies and then really developing them such that we're -- such that we are -- to the point where we are today and beyond.

So, Eric, maybe if you wanted to comment on -- maybe some of the feedback that you've heard about this particular application, maybe comment on the cost economic analysis state that you were -- that you helped drive, And then maybe some other color on this application..

Sure, Phil. Happy to speak. It’s actually I’m very happy to speak about this program because extraordinarily satisfying to open up this area of development opportunity in there that also represents a very significant region of unmet need for patients.

We ended up having a very busy year and then a particularly busy quarter that has been really satisfying and progressing this program. You've I believe, I've already seen from earlier this year, the work that Phil has talked about from St. George Hospital in Hamburg.

And I don't know, if people really fully appreciate just how challenging can be for surgeons and for the interns who are managing these patients. Because what we basically have heard from physicians in Germany and France and from the U.K., and here in the U.S., is that basically when you end up having these patients in a need for emergency surgery.

You realize on the one hand, you have no choice but to take them to the law. On the other hand, it can turn into a complete nightmare and you have no idea just how severe the bleeding can be. So, we were very fortunate to end up having both the retrospective data from St.

Georg Hamburg, as well as ongoing data they're collecting to provide a characterization of the potential benefits in this exploratory indication in -- the move of -- remove a tableau and other antithrombotic and other anticoagulant medications.

And we've also been using those, this opportunity to then leverage that data to be able to let a solid reimbursement and registration opportunity. Now, Phil mentioned the manuscript that we presented or actually published just last month, it was extremely satisfying to be able to find that there's enough robust data out of the work from St.

Georg Hamburg that we've been able to work with economists at the Georgia students in the U.K. -- economist at the university of Newcastle to be able to put together what was considered to be a very, very dominant strategy for the treatment of patients. And Phil's already mentioned that it provided an assessment that may U.K.

model for reimbursement based upon the results that we're seeing from St. Georg hospital in Hamburg, you'd be talking about approximately $5,000 per patient saved, not to mention the significant decrease in the risk of bleeding for these patients.

So based upon that work and obviously we're having ongoing discussions with payers to end up presenting that data. We have now decided to initiate last week a prospective multicenter U.K.

trial that's intended to demonstrate the consistency of results for ticagrelor removal and reverse with potential patient in a prospective way as opposed to the investigator initiated trial that included both prospective and retrospective patients. Now that's, it just started last week, but we already have first patient on the same week.

Once that was initiated and we were anticipating to have a -- just based upon the rate with which patients have these problems to have a results available for the second half of 2020.

And just to personalize this area a little bit, when speaking with physicians in Scotland and in the U.K., what I end up hearing is that, basically they often will have one to three patients per week when they're coming in and they basically either have to look -- try to temporize them while they might have studying engineer and they're trying to ask graduate them or they're being forced to take them to surgery, if they have severe enough ischemic disease.

And then just face the consequences.

As a matter of fact, during the presentation of our data at the European Cardiothoracic Meetings in Lisbon last month, one surgeon who had actually used the device on -- two patients as an off label explore to use not associate the company, indicated that he was basically just shocked by the traumatic improvement he saw in terms of patients bleeding.

So we are extraordinarily excited to have an opportunity to be able to bring forward, what we hope will be an important therapeutic advance. We're still an experimental mode, but -- as I've noted, we hope to have data for you the second half of next year..

Great. Okay. I apologize, Josh.

And maybe Vince if you wanted to comment on the, the EU label expansion efforts?.

Great. Thanks Phil. Good to talk to you, Josh. Basically, we are aggressively pursuing expansion of our label based on data that were observed in Hamburg. As Eric mentioned that data was very compelling had great statistics behind it, which we think is quite possible to bring that forth as a label expansion. So, we are actively working on that now.

And, hoping to hear back from the regulator soon on their assessment of our filing and the expansion of label for specifically a ticagrelor..

Yeah. Okay, great. Thanks again..

The next question is from Andrew D'Silva of B. Riley FBR. Please go ahead..

Hey, good afternoon. Thanks for taking my question. And sorry if you highlighted that this, but I was moving between calls. I'll start with just presenting it as far as they'd go. While you're transitioning countries from them managing sales, I see you going direct.

What happens during that transition for your period? Are they still the touch point with hospitals that they were working with or is it a light switch and then -- everything was handed over from presenting this to you? And then examining their corporate structure? It seems like a lot of overlap between Mexico and the U.S.

kind of both fall under the North American banner there.

Is there anything we can take away with that as far as your progress and as things go forward with REFRESH2?.

It wasn't, I didn't quite catch the last part of your question about the U.S.

and REFRESH2, could you maybe state that one more time please?.

Yeah. So just looking at presenting cases, corporate structure and Mexico and the U.S.

both fall under their North American banner and I was curious since the -- you know, leadership of that division is obviously going to be overseeing the Mexico aspect of the launch, is there any sense of how that can progress after a REFRESH2 is completed and assuming, you're able to enter the U.S.

market?.

Yeah. So -- you know, I think -- with Fresenius, the handoff has been pretty smooth in the countries that they've exited. And that we've taken over. This was the negotiated item, in return for giving exclusive rights to for Fresenius, exclusive distribution rights to Fresenius in Mexico and South Korea. Most of our distributors have some kind of tail.

But you know, the, what I can say is that the transition has been very smooth. And so, we're up and running. And, we've been working to bring our knowledge, our experience, our resources that we've built over many years, and our expertise in direct sales to these markets. And I think things are going well.

I think, in the United States, as you say, the head of percentage Mexico is a very important person in the Fresenius, North America team.

And, I think that, we I think we're very pleased by the level of enthusiasm of the leadership therefore the product because, I think that's really what will make the partnership ultimately successful is having a mandate from the top to basically drive sales of this product.

I think, as we've discussed before, I think Fresenius is a company that is an expert in machines, blood purification machines in both chronic dialysis. But also hospital based acute care dialysis. And they are also one of the leaders and disposables for those markets.

And I understand I think that, having high margin disposables that that tap a much larger market that does people with renal failure in the ICU for example, is a positive and it is a very good strategy. So, Chris Kramer, our VP of business development is online, who also works with closely with Fresenius.

I don't know, if you had any other comments, Chris..

Yeah, thanks, Phil. I think you you've covered just about everything. With respect to Europe, you're right, we've negotiated that transition. FMC has been very cooperative with us. And making that happen, with the exception of maybe a few tenders in Poland by enlarge and that is, we're managing those new territories, under our direct sales.

With Mexico, Andrew, you're correct. It does fall into North America. It does, you know, give us some access to the US management team, which I think is a good thing. Right now, Mexico has its own -- FMC Mexico has its own management team and org structure, which we've been primarily interacting with. And they've been fantastic.

They've really prioritize our product. And you can see it in terms of how they support it and how they put resources towards it. We're with respect to just getting market clearance. I think we're pretty close in Mexico. I'm keeping my fingers crossed. It's with the Mexican Health Authority right now.

And we're hopeful that we can get it before the end of the year. But we're seeing, a lot of pre-launch activities being run by the FMC Mexico organization. We've already had sales training with completion of marketing collateral. And they've created a really nice set of store branded exhibition booths, which is quite impressive.

It's actually one of the bigger and better ones that I've seen from our distributors. So I'm really enthusiastic about that. And then, for the first time last week, they exhibited at a customer conference, in EU and Mexico. So, I'm seeing a lot of good things coming up. They're healthy. In the FMC territories, we see them growing.

After we've, we've reorganized the sales territory. And we're seeing a lot of good progress and support coming out of the FMC Mexico organization, also the Korea organization too. I shouldn't leave them out they've been also very supportive..

Okay, great to hear. And then, as far as the direct sales go, with the expectation be just a law of averages. Obviously, there's going to be the highs and the lows. But that a sales person on average, outside of Germany from the direct sales force, would be able to generate as much in sales over time as a mess or a German sales rep would.

And then, as far as the price or trial goes if that's successful, should we also expect that it can result in a label expansion similar to how we were talking about remove in the US after refresh to a completing the as soon as you get approval there..

So I think, in terms of the direct -- the productivity of direct sales reps outside of the outside of Germany, certainly we believe that they can -- and they are being actually highly productive in a number of different countries. I think in Germany, we benefit from having all the pieces in place, very significant keeps any leader support.

Direct reimbursement for the product, Medical Society support and having -- didn't -- in Germany for a long period of time. In other countries that we're going direct, not all the pieces aren't necessarily in place.

But we are working very hard to put those pieces in place, particularly our reimbursement where some of the new data that we have is actually quite compelling. But that being said, we believe that a direct sales rep has the ability to do potentially millions of dollars in sales.

When you look at Germany, they're already on the one to three quarters $2 million in sales per rep in Germany.

And that's one of the reasons why we've been expanding the sales force in Germany because the opportunity is so vast and the -- there's just it would be much more efficient with more people, and again this is one of the reasons why we believe that with this increase headcount that we've brought on board, the vast majority of which are on board now that this will have a very significant impact on 2020 sales.

Now, your second question about the ties or trial. The QUASAR trial is intended to provide, as Eric mentioned additional data to support this product in the marketplace, but as Vince has mentioned to you, we are already actively seeking global expansion for scientists in the EU based upon the data that we already have. Now, as it relates to U.S.

clinical strategy, this is a problem that is global, the use of these anti-thrombotic agents, again $20 billion worth of sales, millions of people on these drugs all over the world is a problem all over the world, but particularly in the United States where, every patient that gets a stent should be on dual anti-platelet therapy of aspirin and one of these anti-platelet agents for example, right, and so in the United States is probably where the penetration of these drugs are the highest.

And so -- but because of that, the problem is also the highest or at least up there amongst modern medicine, westernized medicine countries. So, we'll have more detail on our U.S. regulatory strategy in the future. But suffice it to say that all this data is very helpful towards our U.S. regulatory strategy..

Okay, great. Hey, thank you very much for taking my questions and good luck closing out 2019..

Great. Thanks a lot Andy..

The next question is from Sean Lee with H.C. Wainwright. Please go ahead..

Hi, guys, and thanks for taking my questions. I’ve got couple questions on the research pipeline. So according to this slide, we can't expect to see an interim readout from the REFRESH 2 study in the first half of next year.

Could you provide a little bit more color on what can we see from that interim analysis?.

Sure. Eric, do you want to take that question..

What we’ll be able to see from our analysis will be whether or not we need to have any rebalancing -- estimation, since the assumption we have with the FDA were based upon a certain rate, unanticipated rate of AKI. But I do want to reemphasize, I've been asked before for re-released that information.

In order to maintain the integrity of the study, we will not be sharing the results of the interim analysis with analysts. Our goal is to make sure that the FDA has no questions if this was conducted in a way that will provide very robust and compliant data.

But that re-estimation will be extremely useful to us to make sure that we are on track with regards to the number of patients that will need nor to be able to achieve is significant results for the trial..

Okay.

So will we see any kind of public disclosures?.

Not in terms of numbers that -- if we, I mean basis, it's a blinded trial, so we would potentially compromise the integrity of the trial by releasing results of the interim analysis..

What would be analysis of that, if one any results from that interim analysis, any results in terms of whether or not the trial needs to be expanded, or whether or not there were any safety issues that were concerned, but I think that what the major message would be is that, obviously, the DSM recommended continuation of the trial, that would be very positive message..

Okay. You mentioned the essential for expansion or rebalancing.

What are the criteria are you using for those in case to determine whether the studies either the expanded or rebalance?.

The interim analysis is designed to end up assessing whether or not we are overpowered, under-powered for assessment futility as well as assessments for any safety findings.

As Phil noted, the Data Safety Monitoring Board will be reviewing the results of that analysis to make sure that they concur that there is a reasonable basis for progressing for the study.

If were -- if one were to see that there was a larger some sort of signal, one can make a decision about a change in downward in terms of the study and similarly, if one sees that the number of patients with event rate is smaller than anticipated one might need to increase the number.

I will not speculate right now, because that would imply that I've already done the interim analysis..

I see. Thanks for the clarification. My second question is on the CytoSorb study.

Could you provide a little bit more detail on that in terms of patient size and points, what exactly are you looking for?.

Oh sure. Happy to do. So I will also note that we have posted the study on clinical trials that go. So I'll be happy to speak to it now. But if you -- or sometimes easier to see things in writing than from a verbal statement.

The trial is designed as a multi-center perspective pharmacodynamic trial to confirm that the use of CytoSorb in a parallel circuit during cardiopulmonary bypass in those patients who are presenting to the OR for treatment of ischemic events in the setting of emergent surgery with Ticagrelor onboard.

They will be showing that we can end up reducing both the concentration of Ticagrelor in a clinically significant way as well as reversing the inhibition of platelet function that is produced by Ticagrelor Brilinta platelets.

So the primary endpoint is designed to end up providing the public demonstration that we're removing drug and improving platelet function.

But we will of course also be assessing a number of clinically relevant endpoints that have both patients value as well as reimbursement value in terms of the incidence of the platelet transfusion, red blood cell transfusion, perioperative bleeding, the need for periop [ph] academy.

All the findings that were so impactful, not only in CytoSorb study, but that also ended up greatly impressing the reviewers of pharmacoeconomics online to publish the paper because of the demonstrated benefit of therapy to an NHS model.

So our hope is to be able to end up confirming that prospective fashion and thereby demonstrate that not only have clinical benefit, but also some economic benefit with this societies..

Thanks for clearing. And that's all I have..

Great. Thanks John..

Your next question is from Jason McCarthy of Maxim Group. Please go ahead..

Hey, guys. Michael Okunewitch which on for Jason. And congrats on the progress. It seems like there's been a lot going on these past few months. So this one. First one's relating to the removal of anticoagulants and the cardiovascular surgical setting, because we saw some very interesting data from that.

Considering you're pursuing expansion based on the existing data, how early do you think we could see a label expansion or at least hear an update on the path forward?.

I will let Vince answer that one..

Right Vince maybe a comment again please..

Sure. Again it's too early to tell exactly the timing on this. It's a regulatory body at least within Europe for the label expansion. They don't function under statutes like the FDA where you have a 90 day statute for them to respond on a submission. So we are working closely with them and looking to try and get this done as quickly as we can.

But I'm not in a position yet to exactly say what the timing of that might be. Again with the transition that's occurring in Europe right now between MDD and MDR, I think all the notified bodies to be quite frank with you right now are pretty much overwhelmed with the amount of work they have.

So unfortunately, I can't give more clarity on the timing of that at least at this point..

Understandable. Thank you anyway. One more on the economic impact, considering that the per patient savings of around $5,000.

Could you give us an idea of how big of a total economic impact this could have on the European healthcare markets?.

I don't happen to have that. I'm not sure Phil has. I haven't done that analysis. We'll focus on patient value..

Yeah. I mean I think that there's actually a lot of -- so this is a major unmet medical need. So from a clinical value I think if you ask any cardiac surgeon about this issue of these Antithrombotic emergency cardiac surgery you'll get a very uniform answer. It's a very challenging problem that causes severe patient morbidity and mortality.

I think that from an economic standpoint, it's hard to estimate exactly how big of a problem this is. But when you account for example in the United States again these drugs the typical recommendation for dual type platelet therapy is after you get a stent put in you should be on these drugs for a year afterwards.

And so at least, and so if you have chronic under chronic underlying problem, you could be on these drugs indefinitely. And so, if you say that there's 1 million, there's approximately 1 million stents place every year in the United States. You know, obviously some patients get more than one stent.

But if the standard of care is to be on these anti platelet agents, then you're talking about a large number of patients on these agents and then when you talk about a fraction of patients who require emergency cardiac surgery, you're talking about roughly 4% to 5% of patients.

But then, what you don't talk about is the -- and what we haven't talked yet about is really the urgent patients and these are patients where they need surgery but they may not need immediate surgery. But they can't go to surgery because they have these blood thinners on board. Otherwise, they are at high risk of bleeding.

So these patients sit at risk of centrally something bad happening to them from a clinical standpoint, they sit in the hospital waiting days, often three to five days for the drug to wash out before they can be considered for cardiac surgery. There's a significant -- this is a much larger population than the emergent population.

And, and there is a significant cost of hospital systems are incurring because of these patients, basically just sitting in a hospital bed for, up to a week at a time.

And so if we can actually take those patients, if cardiac -- and the problem is real, we've talked to many cardiac surgeons who said, we have these large cohorts of patients who are just waiting for cardiac surgery, and if I had the ability and confidence because of using a therapy like CytoSorb to take them to the OR right away.

That is in their patients best interest because again, they wait at risk, so that the underlying reason why they need surgery may ultimately hurt them. But also that it has a significant cost benefit to the hospital. And so, and so anyway, so the hard to quantitative, but that's a little bit of the color of the problem..

And thank you very much. Very helpful. And again, congrats on the progress..

Great. Thank you, Michael..

The next question is from Jason Kolbert of Dawson James. Please go ahead..

Hi, guys, thank you so much. I guess as we get to the end of an hour, it's appropriate to close on HemoDefend. I know you've mentioned that very, very briefly, but can you talk just a little bit about the plan to follow the IDE by year end and help me understand, you know, how a 2020 approval is possible. Thanks..

Sure, Jason, thank you. Let me hand it over to Vince, who's been leading this effort.

Vince?.

Great. Thanks, Phil. Hi, Jason. So Jason, we're in the process right now of completing all the engineering, validation, et cetera, for HemoDefend IDE that also includes doing the external testing at several blood banks with respect to the device and removal of potassium. Our intent is to file by the end of the year.

So we're actually in the process of preparing the IDE right now. So again, our goal is to file by the end of the year, and I think, you know, we're aggressively targeting that.

That would you know, the trial for a blood filter is unbelievably simple compared to the things that we have to do in Germany and what, you know, Eric Lee is on the clinical side, you know, this is going to be two sites, and it'll evolve. I think it's about 20 patients. So we believe getting a de novo 510 k about 20 is really possible.

You know, it just doesn't have the complexity associated with it that your typical exit coral therapy in treating, critically ill patients. So we think that there's good opportunity to get that, you know, obviously approved files and approved in 2020..

Can you talk a little -- what might the market opportunity be if I were to look at some of the other blood filters that are out there Millipore, Paul [ph], I mean, they're pretty significant businesses albeit at the margins are going to be different, but can you talk a little bit about what the known market sizes and where do you think the margins might be on that product?.

So, so I think, yeah, so I think that we -- we've specifically designed HemoDefend, to be able to hit price points that the blood transfusion market requires. It's still making a nice profit from those devices. And you know that the overall -- the market worldwide is 100 million packed red blood cell transfusions a year.

But I think our goal is to focus on really where's the greatest need, the purpose of HemoDefend is to try to reduce transfusion reactions and complications of transfusions caused by non-infectious contaminants of blood and then includes a wide range of different, different factors.

And so the risk of transfusion reaction is really in the patients who get a lot of blood and so these are critically ill patients, these are patients undergoing high risk surgeries like cardiac surgery and orthopedic surgery, where blood loss is large blood loss is common.

The resuscitation of people who are bleeding from GI bleeds for example and also in the pediatric population where there's some particular needs that are devices well suited to help fill. So that market opportunity, we have not finalized the business model yet.

We have the ability to bring this direct as I mentioned that a lot of the applications critical care, high risk surgery. You've heard these before in our other business model for CytoSorb. And because of that we have the ability to get this into those channels relatively easily.

And in the United States, we certainly have developed quite a bit of experience in being able to bring this product direct. That said, there are a number of major players in the field. Many of whom are connected to the strategic partners we have today. For example, Fresenius Kabi, one of the largest blood transfusion companies in the world.

Terumo BCT, one of the largest – again, another one of the largest blood -- another one of the largest blood transfusion companies in the world. And companies like Humanatics [ph] and others.

So that we -- so again we haven't -- as we get closer to potential approval, we have already ongoing a lot of efforts to try to evaluate what is the best strategy. And as we get closer to a potential approval, we'll have that much greater detail for you..

Phil, thank you so much. It’s always a pleasure to hear kind of your detailed comments and those your team, companies come along way. Thanks..

Thanks a lot Jason. Appreciate it..

The next question is from Brian Marckx of Zacks Investment Research. Please go ahead..

Hi, guys. Relative to the period those leading risk pursue. Phil, you mentioned that that label expansion is not necessarily dependent on the results of the CytoSorb study. Just for clarity relative to the E.U.

book label expansion, is it specific to ticagrelor or is it more general and would include other anti-thrombotic?.

It is specific to ticagrelor which is currently the most favorite drug following stent placement, for example in cardiac cath, Plavix and Warfarin are some of the other ones that are also very important. But initially it will be for that, but our goal is to expand the usage of CytoSorb to other anti-thrombotic agent and that is part of the strategy..

Perfect. Is it think to assume that ticagrelor is successful that you would follow with similar studies in the other anti-thrombotic..

Yes, There's different there's different dynamics with the different drugs, but yes that is the goal..

Okay. Great. Thanks. Appreciate it..

This concludes the question-and-answer session. At this time, I would like to turn it back to Dr. Chan for any additional or closing remarks..

Well, thank you everyone for your participation today. If you do have any other questions, please feel reach – just free to reach out to Jeremy Feffer at jeremy@lifesciadvisors.com, and we will reply to your questions where possible. We look forward to our next quarterly call. Thank you everyone very much. Good night..

Thank you. That concludes our conference for today. Thank you for your participation..